Many 501(c)(3) charitable organizations hold fundraising activities that feature gaming: casino nights, poker nights, raffles, and of course, bingo. They’re fun!
But keep in mind, there are some rules to observe. A charitable organization can lose its tax-exempt status if it strays from permitted activities—and it may need to pay a tax on its unrelated business income.
However, gaming that is not substantial when compared to the time, resources and activities an organization undertakes to promote its charitable purposes will not jeopardize an organization’s tax-exempt status or generate unrelated business tax. So, the Thanksgiving turkey bingo, the raffle held at the annual fundraiser by volunteers, and other similar gaming activities should all be fine—in the eyes of the IRS. Note that there are some recordkeeping requirements that should be followed, and of course, good internal controls with respect to handling funds should be observed.
But who else is watching? Here in Connecticut, municipalities may have their own requirements for certain types of gaming (e.g., bingo, raffles, casino nights, etc.) and may mandate permits for such activities. To find out more about permitting requirements, charities should consult with the municipalities where they plan to host events, as each municipality will have its own application and filing requirements which must be addressed prior to the event.
Unfortunately, it’s not all fun and games…unless you play by the rules.
Carmody has extensive experience advising tax-exempt organizations, including public charities and community and private foundations from formation.
For more information, or assistance complying with Connecticut and IRS procedures, please contact our Tax-Exempt Organizations & Nonprofits group:
Janie L. McDermott
Partner
203.575.2657
jmcdermott@carmodylaw.com
Maggie E. Smith
Associate
203.575.2685
msmith@carmodylaw.com
Ann H. Zucker
Partner
203.252.2652
azucker@carmodylaw.com
This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.